Today, the IRS announced that it had withdrawn its proposed regulations on gift substantiation which would have encouraged nonprofits to collect, store, and report donors' Social Security Numbers, placing a tremendous liability and burden on the nonprofit sector.

The IRS received 37,977 comments during the comment period, with the overwhelming majority fervently against the proposed rules. Many networks, from the United Way, Independent Sector, and the National Council of Nonprofits, rallied their members and stakeholders in opposition to the rulemaking.

The IRS issued the following statement:

“The Treasury Department and the IRS received a substantial number of public comments in response to the notice of proposed rulemaking. Many of these public comments questioned the need for donee reporting, and many comments expressed significant concerns about donee organizations collecting and maintaining taxpayer identification numbers for purposes of the specific-use information return. In response to those comments, the Treasury Department and the IRS have decided against implementing the statutory exception to the CWA requirement, and therefore that exception remains unavailable unless and until final regulations are issued prescribing the method for donee reporting. Accordingly, the notice of proposed rulemaking is being withdrawn.”

More than 37,000 concerned individuals and organizations submitted comments on the proposed gift substantiation regulation, and virtually all that are viewable expressed a common theme: it is a very bad idea for nonprofits to be asking for donors’ Social Security numbers, maintaining that personal information in their files, and submitting it to the IRS. In the view of many, “never is the better answer” when the question is whether individuals should give their Social Security numbers to people claiming to be soliciting on behalf of a charity.

The South Carolina Association of Nonprofit Organizations opposes this proposed rule. The requirements would place an additional burden on charitable organizations and would expose them to additional liability.

Our donors trust us with their resources, believing in our missions and that we will use those resources to fulfill those missions. If we had to collect personal private information such as their social security numbers, the burden to protect that information would be overwhelming.

This rule would open the door for scam artists to solicit social security numbers and other private information from our donors, all under the protection of this rule. Furthermore, most organizations use cloud-based databases, and while they are often very secure, no encryption is perfect.

Charitable organizations would become targets of determined hackers, knowing that we will have social security numbers. Small organizations would be forced by this rule to spend money that should go to furthering their missions on higher security databases more appropriate for large healthcare systems.

Our donors are already very cautious with their personal information. This rule would be one more obstacle for donors, and there are already so many. Charitable giving will suffer under this rule, and with it, the good work the charitable sector does.

The existing rules are more than sufficient to substantiate donor contributions to validate tax deductions. Please do not add more rules which would force charities into an awkward and legally perilous position, and put at risk the sacred trust between donors and the charities they support.